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Shire Beats in Q4, Positive Guidance - Analyst Blog

Shire
(
SHPG
) reported fourth quarter 2013 earnings (excluding special items
and amortization) of $2.26 per American Depositary Share (ADS),
up from $1.66 per ADS in the year-ago quarter and beating the
Zacks Consensus Estimate of $2.03.

Quarterly revenues increased 12% to $1.3 billion, in line with
the Zacks Consensus Estimate. The increase in revenues was driven
by a robust growth in product sales.

Adjusted research & development (R&D) costs declined
3.7% to $222.0 million in the reported quarter. Selling, general
& administrative (SG&A) expenses edged up 0.7% to $387.7
million.

Full Year 2013 Details

Shire reported full year 2013 revenues of $4.9 million, up 9%
from a year ago and in line with the Zacks Consensus Estimate.
Earnings per share came in at $7.66, up 23% from the year ago and
easily beating the Zacks Consensus Estimate of $7.27.

2014 Outlook

We remind investors that Shire acquired all of the outstanding
shares of erstwhile ViroPharma for $50 per share in cash or
approximately $4.23 billion.

Shire expects to achieve mid-to-high teens product sales
growth in 2014 driven by addition of ViroPharma business.
Royalties and other revenues are expected to decline by 10% - 15%
in 2014 from 2013 levels. Shire expects earnings in 2014 to grow
at a similar growth rate as in 2013 (roughly 23.0%).

Pipeline Update

Shire is looking to expand Firazyr's label into ACE
inhibitor-induced angioedema. Following the review and discussion
of the data from a small investigator sponsored trial with the EU
agencies, Shire expects to withdraw its supplemental Marketing
Authorization Application (MAA) which was submitted earlier in
2012.

Shire will now resubmit its MAA with the data from the ongoing
phase III trial which was initiated in the fourth quarter of
2013. This trial will now support both EU and U.S.
registrations.

Meanwhile, Shire was evaluating the efficacy and safety of
Vyvanse as an adjunctive treatment for major depressive disorder
(MDD) in adults who did not adequately respond to
antidepressants. However, Vyvanse did not meet the primary
efficacy endpoint in the phase III trials and Shire has decided
to discontinue the clinical development program.

Nevertheless, Shire is evaluating Vyvanse for the indication
of binge eating disorder (BED) and expects to submit a
Supplemental New Drug Application (sNDA) to the U.S. Food and
Drug Administration (FDA) later in the year.

Shire is also evaluating lifitegrast for the treatment of dry
eye disease. However, lifitegrast did not meet its prespecified
co-primary endpoint in a phase III study. Hence, Shire intends to
investigate the full data from the study and plans to further
discuss with the FDA in the first half of 2014 on the future
development program.

Other Developments

Shire announced that the chief financial officer (CFO), Graham
Hetherington, has resigned and will step down effective Mar
2014.

Our Take

We are impressed by strong fourth quarter results. Shire is
well placed in the ADHD market driven by key drug Vyvanse and is
working on a label expansion of the drug. The acquisition of
ViroPharma is expected to boost the bottom line by 7% in 2014 as
compared to the earlier projected range of 5%.

The addition of ViroPharma's lead drug, Cinryze, will enable
it to build a rare disease business (estimated at $2 billion).
ViroPharma's lead drug Cinryze is approved in the U.S. for
routine prophylaxis against angioedema attacks in adolescent and
adults with hereditary HAE.

Cinryze complements Shire's Firazyr which is indicated for the
on-demand treatment of acute HAE attacks. We are positive
on Shire's acquisition of ViroPharma which will strengthen its
HAE franchise as Cinryze and Firazyr are two complementary
therapies for the treatment of HAE.

Meanwhile, Shire's efforts to realign its business structure
to drive growth and innovation are noteworthy. The realignment is
expected to drive improved operating leverage in 2014 and
2015.

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